Ensure “minimal” variation in bulk and retail term deposit interest rates: RBI to banks
By Neelima Shankar
Aug 16, 2012
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The banking regulator, Reserve Bank of India, has directed the banks to make sure that the variation in interest rates offered on term deposits (bulk and retail) of similar maturity are "minimal". That is, the difference in interest rates on term deposits (both bulk and retail) having the same maturity should be least across all the banks. However, RBI has not quantified the term "minimal" yet and so there is no specification as to what the minimum difference can be.

A single term deposit of more than Rs. 15 lakh is termed as a bulk deposit and term deposits of less than Rs. 15 lakh form part of retail deposits segment.

RBI has issued this directive to the banks after carefully observing the trend in fixed deposit interest rates being offered by different banks. It noted that there is a broad difference between term deposit rates offered by different banks for similar deposits. In addition to this, for deposits with similar maturities too, the banks are offering different interest rates.

According to the reserve bank, this wide difference is due to poor liquidity management system and faulty pricing methodologies adopted by the banks.

In an earlier directive to banks, RBI had asked the banks not to discriminate in paying interest rates on fixed deposits except for those fixed deposit schemes which are specifically meant Indian for senior citizens residing in the country and for single fixed deposits of over Rs. 15 lakh.

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